September 2010 Issue

While September 2010 marks 50 years of the cartelization of oil by OPEC, it also marks the Journal of Energy Security’s second year of publication in an attempt to draw attention to the dangers of oil dependency, among others, on national and collective security. The cartelization of a strategic commodity, any commodity, is an anathema to competition and choice. The effective monopolization of oil and the determination of oil prices through the manipulation and collusion of supply by a relatively small number of producers is as much a testament to OPEC’s success as it is indicative of a collective failure to move beyond oil, particularly in the transportation sector which it dominates. If the JES was only singularly dedicated to informing and promoting transportation fuel-choice, it would still be a battle worth waging. But the JES advocates much more. We understand that limited energy supply, limited transportation and distribution alternatives, and single-country dependence on any one fuel is a danger. Just as the ‘resource-curse’ can twist resource allocation away from human development goals and towards corruption, and thwarts institutional capacity-building across commercial, judicial, and administrative domains, so too does the ‘dependency-curse’ retard competition and fair market pricing for energy resources, and weaken a nation’s ability to provide for its own energy security. This is the larger scope of the challenge we’ve undertaken.

We understand that, as former Saudi oil minister Sheikh Ahmed Zaki Yamani has said, “technology is a real enemy for OPEC.” But as Nancy E. Brune points out in her article, “50 Years Later: OPEC's Continuing Threat to American Security,” America’s investment in new technologies still lacks the critical mass that could challenge the oil-OPEC transportation paradigm. But this is not singularly an American challenge. In 2009 China surpassed US investment in ‘clean energy investment’ which includes the development of fuel alternatives. In the very first issue of the JES in October 2008 Greg Dolan at the US Methanol Institute explained China’s push towards developing methanol from coal as a strategic transportation fuel. Since then we’ve published a series of articles on alternative fuels and power development including ethanol, thorium, and battery technologies like lithium; alternative gas suppliers such as Algeria, Kazakhstan, Turkmenistan, Azerbaijan, India and the High North (Arctic); and regional supply sources such as the Caspian, Central and South Asia, and Latin America.

Beyond OPEC and the oil question, this issue of the JES highlights the Slovak Republic’s painful evolution towards bolstering its national energy security. Having suffered disproportionally from the January 2009 Russia-Ukraine gas crisis, the article, “The Evolution of Energy Security in the Slovak Republic,” suggests that the country is finally beginning to take energy security seriously in spite of its continued Russian gas import dependence.

For regular readers of the JES, we continue with our ongoing commitment to exploring the nexus between water and energy. Contributor Allan Hoffman from the US Department of Energy explores what he calls the ‘water-energy conundrum’ and explains some of the dilemmas inherent in this relationship. Beyond words to deeds, the Institute for the Analysis of Global Security (publisher of the JES) co-sponsored earlier this month an experts’ meeting on the water-energy nexus in cooperation with the Stockholm International Water Institute (SIWI) in Stockholm. A year from now we hope to report on tangible progress in this cooperative endeavor with SIWI and others on the occasion of the 2011 World Water Week.

Finally, it’s valuable to point out that in diversifying oil dependence away from OPEC member states, Brazil’s efforts at developing its ‘pre-salt’ oil reserves are beginning to take shape. Estimated at some 50 billion barrels of oil, this will provide some cushion to faltering non-OPEC oil output around the world if Brazil’s coastal oil resources can be substantially exploited. Mark Langevin of BrazilWorks.org lays out the details in his contribution entitled, “Brazil’s Big Oil Play: How This Nation is Charting National Energy Security.” Just as energy is no longer a narrow resource-issue, so too are security and security concerns no longer limited to the kinetic. Energy and its ‘soft-security’ permutations are ever present as ‘threat multipliers’ hover like cloud-cover across the global security landscape. With all due respect to OPEC, this is why the Journal of Energy Security is here: to make the connections between human, national and collective security and to embrace, not avoid, the complexities in these arguments.

Just run the numbers and the message is clear: OPEC's present and future oil market dominance is a clear and present danger to long-term US national security interests. Outside the narrow paradigm of 'we need' (their oil) and 'they want' (our money), mutual cooperation suffers on a much broader host of international security, environmental and political issues. In July 2010, the US imported more oil from OPEC member states than in any other month since President Obama took office. Our economic security, our ability to protect our national interests, and our ability to stop the hemorrhage of US financial assets are all at stake. Dr. Nancy E. Brune crunches the numbers and tells us where we stand on the occasion of the cartel's 50th anniversary.

Two-thirds of the world’s population lives within range of any given coastline. Yet by 2025, 40 percent of the world’s population will be living in countries experiencing significant water shortages. According to some calculations, the amount of sunlight hitting the earth's surface in one hour is enough to power the planet for an entire year. So what is the conundrum in the water-energy nexus? The fact is that most of the earth's water is seawater unfit for human consumption. Most of the world's fresh water requires energy for treatment and distribution, and literally all power generation requires water for processes like cooling and for the extraction of resources on which it depends. In our ongoing commitment to exploring the relationship between energy and water, long-standing JES contributor Allan Hoffman takes a thoughtful look at our need for both of these goods in a world increasingly strained by resource availability and challenged by the absolute need to provide both to an expanding world population.

The energy challenges facing Central and Southeastern Europe (CSEE) are formidable. For the most part these states represent relatively small markets. While inter-connectors are being built for trans-border energy and power transmission and distribution, taken as a whole the region is nowhere near the creation of an integrated network that would allow for, as an example, reverse flow of natural gas across many or all borders during a time of crisis. The region also needs consistent and stable cross-border regulatory policies, the creation of bulwark-infrastructure that would allow for sufficient economies of scale consistent with large scale foreign investment. Another necessary adjustment is for the region to have a common carrier system. Former US Ambassador and long-time friend of JES Keith Smith looks at some of these problems in depth with a close look as well at Russia’s role and impact on CSEE energy security.

Brazil for decades has marched towards national energy security by combining a national push towards integrating ethanol into its national fuel mix, accompanied by the large scale introduction of flex-fuel vehicles. Brazil has now accelerated its national energy security objectives through the discovery and exploitation of new 'pre-salt' oil reserves. Over the next five years Brazil may challenge the status-quo of the world's oil architecture with output levels equal to some of OPEC's largest producers. How the country evolved to this envious position is the subject of the following article by first-time JES contributor Mark Langevin.

OPEC is celebrating its fiftieth birthday and the world should take note. OPEC certainly will. Through the cartelization of the world’s most strategic commodity, oil, it wields inordinate power built with the wealth of world oil consumers. This needn’t be the case. Solutions exist today in the form of technologies readily adaptable to petroleum-fired combustion engines. Alternative fuels exist which can compete with the cost per gallon of a gasoline-driven vehicle. But political inertia, among other barriers, has inhibited individuals and nations alike from breaking oil’s stranglehold over transportation fuel. Oil still rules. Clearly, it is time to break this paradigm.

Historically burdened by energy supply and gas transit dependence on the Russian Federation, the Slovak Republic is awakening to the new realities provided by a tangible manifestation of a common European market for energy and power. This has, however, been a painful evolution made all the more troublesome by the significant costs associated with the January 2009 gas crisis. CEE energy experts Andrej Nosko and Petr Ševce tell us where this EU and NATO Member State is headed in shoring up its own energy security future.

In spite of the fact that Russia and China share the world's longest common border and a common desire to provide energy resources (Russia) and to consume them (China), all is not what it is cracked up to be. The 'strategic relationship' may be weaker than it first appears, given China's economic ascendancy and a wobbly-outlook for Russia's future against a dramatic fall in the price of its natural gas exports. There are bright spots in bilateral energy relations however. How this energy-relationship has evolved over the past year and where it might be headed is explored in the following pages.

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